Daily Archives: December 22, 2007

As Saudis Raise Money, US Companies Go On Sale (C)(MER)(AMD)(MS)

Saudi Arabia is sick of the big sovereign funds in China and Abu Dhabi kicking sand in its face. The country plans to put a fund in place that will "dwarf Abu Dhabi’s $900bn" fund according to the FT. That means it will almost certainly be larger than similar funds in Singapore and China.

Most of these governments have had the means to pool large amounts of their own capital to create investment and buy-out funds. Now they are seeing large parts of corporate America go "on sale". Most of the properties available are cheap because of poor management or the current financial crisis. But, the value of many of these companies is likely to rebound.

Sovereign money has recently gone into large corporations including  AMD (AMD). Morgan Stanley (MS), and Citigroup (C). There are rumors that Singapore’s Temasek fund could put $5 billion into Merrill Lynch (MER).

The Saudis may start with a big transaction to prove that they are in the game to win. Bank of America (BAC), which is near its 52-week low and may have more mortgage problems could be a target. Other huge companies with big revenue and established businesses like Sprint (S) and GM (GM) could make it onto a list.

With hundreds of billions of dollars of willing capital coming into the market, almost any troubled US firm becomes a candidate.

"Buy American" takes on a whole new meaning.

Douglas A. McIntyre

Posted on: December 22, 2007 – 3:15 pm in Mergers and Buy Outs, , , , , , ,

Bill Gross of PIMCO Says Economy Is In Tatters

Bill Gross, king of the bond industry and head of PIMCO, says that the recession has begun. He has been begging the Fed to cut interest rates. Perhaps he secretly hopes that a downturn will prove that he was right all along. The Fed was too slow and did not take rates down fast enough, at least according to Gross.

In an interview with the FT , Gross said "If I had to be bold I’d say we began a recession in December."

Gross may be right. But, interest rates and the collapse of banks are only some of the problem. Fuel and food price inflation are also taking their toll

The man was unkind to hedge funds.  A hedge fund, he said, was "an unregulated bank. A bank isn’t a con but a bank is a regulated entity. A hedge fund is not . . . it’s been a con on the government in terms of their unwillingness to regulate the industry.

Gross may be smart, but he does seem to have a gift for making comments that have the appearance of looking into the rear view mirror of recent history.

Douglas A. McIntyre

Posted on: December 22, 2007 – 11:23 am in Economy

The SIV “Super Fund”: Dead And Buried (C)(BAC)(JPM)

The SIV "Super Fund" created by the Treasury Department, Citigroup (C), Bank of America (BAC), and JP Morgan (JPM) is dead. Once Citi took its own SIVs onto the banks balance sheet, much of the money which was needed for bailing out the pools of capital had been taken care of. Potential investors in the $100 million aid fund were reluctant to write checks. The amount to be raised kept falling and near the end talk was that the total fund might be as small as $50 billion.

Many financial experts like Alan Greenspan thought the fund was a house of mirrors. It would disguise the real value of the SIV assets by propping them up with short-term loans.

Wall St. may need a "Super Fund", but not for SIVs. The price of Citi’s stock has dropped again and now sits at $30.24. JP Morgan and Bank of America have given up some of their modest gains from the last three weeks as well.

The big money center banks are still in trouble. They may have billions more in mortgage-related write-offs. They may need more capital. If there is a requirement for a "Super Fund" it will be to pump money into the largest financial institutions to keep them solvent.

The "Super Fund" can be renamed "The Fed".

Douglas A. McIntyre

Posted on: December 22, 2007 – 11:12 am in Banking, , ,

This Week on Stockhouse December 17 to 21

Markets were whipsawed this week as big investment banks reported disappointing results. Metals dragged Toronto trading lower.

On Monday…

Danny Deadlock looked at how tax loss selling has accelerated declines among certain small cap exploration stocks, and encouraged investors to watch shares of a certain semiconductor stock in Don’t poison the punch yet!

Luke Brocki noted that the uranium spot price eased last week, despite numerous grassroots opposition campaigns that could squeeze already tight supplies of the radioactive metal in U308 spot falls.

And the folks at 24/7 Wall Street said that takeover talk failed to boost shares of a gold and silver explorer based in Peru in The Stockhouse weekly Canadian company report.

For news about small stocks that made big moves in Monday trading, please read the Stockhouse Canadian Small and Micro-cap Stock Report

On Tuesday…

Matt Stiles said bring on the charts when making a call on the current state of the markets and where they might be headed in Levels worth watching for a bear market.

Part four of littleguy123’s analysis of the derivative meltdown and those taking part behind the scenes digressed to study the oil supply situation in “Axis of Evil” IV: Evil-doers unite.

Straight from Mexico came a report on junior gold company Animas Resources (TSX: V.ANI, Bullboards), by community contributor Kevin Graham. Animas Resources Ltd. – A newer, wider, and deeper lens is thorough and clear – pictures included.

Lions, tigers, bears – and cows. Investors cheered a government investment in a Canadian biopharma company specializing in animal vaccines, and Buzz listened in. Read Bioniche Life Sciences gets government nod for more.

Platinum went for gold Tuesday in Buzz on Commodities. Read what Stockhouse members had to say about their favorite hard assets in Platinum hits high, uranium on shaky ground.

For news about small stocks that made big moves in Tuesday trading, please read the Stockhouse Canadian Small and Micro-cap Stock Report and the Stockhouse U.S. Small and Micro-cap Stock Report.

On Wednesday…

Boris Sobolev, of the Resource Stock Guide, brought a little bit of cheer to precious metals investors with this unique analysis of the relationship between gold and gold stocks to oil prices. It’s not all bad in Optimistic outlook after two years of failing rallies.

Roy Martens, of Resource Fortunes, drilled down into charts for the XAU, gold, silver, the USD and major indexes in Order over chaos: profit from the big picture!

What does Steven Saville think about China’s economic position with respect to the USD / Yuan exchange rate, and what are the options? Find out more about China’s currency problem.

Cross-Bullboard traffic made for some interesting revelations, and Buzz on the Boards got to the bottom of them in Animas Resources catches more eyes.

It was gold versus silver Wednesday in Buzz on Commodities as Stockhouse contributors stated their cases, in Gold more bright than silver?

For news about small stocks that made big moves in Wednesday trading, please read the Stockhouse Canadian Small and Micro-cap Stock Report and the Stockhouse U.S. Small and Micro-cap Stock Report.

On Thursday…

New contributor David Banister brought his take on tax loss selling to the Stockhouse scene today, with notes in support of cheap stocks in the junior resource sector. Read more in Small cap junior stocks now on sale.

David Reidel, of China Investment Opportunities, sat down for a Q&A with Weekly Wizards in a round-up of all things China-investment related, in Focusing on China.

Exploration moves forward apace with an Argentinian copper play in this report by Luke Burgess: Mineral resource at Josemaria.

Don Rodgers offered a handy year-end wrap-up of the stocks he received the most queries about over the course of the year in Alberta royalty revenue schedule hurts drilling stocks.

For news about small stocks that made big moves in Thursday trading, please read the

Stockhouse Canadian Small and Micro-cap Stock Report and the Stockhouse U.S. Small and Micro-cap Stock Report.

On Friday…

Steven Saville provided an in-depth analysis of the HUI, including strategies for protecting against more downside. He also presented a case for a junior explorer called Golden Queen Mining (TSX: T.GQM, Bullboards) in What to do about gold stocks?

Why paper money is NOT money; why strawberries, art, and lead are NOT money; and, why gold IS money. Balancing risk in a time of crisis is by David Galland of Casey Research.

Stuck for what to give on Christmas? Try giving away your stocks. Stockhouse reporter Robert Arber explored the tax considerations associated with donating stocks to The Fig Tree Charitable Foundation in Fig Tree shares the wealth.

Posted on: December 22, 2007 – 10:59 am in Uncategorized

Wal-Mart (WMT) And Macy’s (M): Holiday “Hail Mary”

Wal-Mart (WMT) and Macy’s (M) are going to throw the retail ball up in the air just before Christmas and hope that the consumer catches it. Both stores plan to open some outlets 24-hours a day.

According to Bloomberg "today and tomorrow, retailers may record 9 percent of all sales from November’s Thanksgiving holiday to Christmas, according to Michael Niemira, chief economist at the International Council of Shopping Centers.

A number of retail experts believe that this will be the slowest holiday for spending in five years. Online spending is only up 19% compared to an improvement of about 26% a year ago. Purchases by people with household incomes below $50,000 have been especially disappointing.

Keeping stores open late may not solve any problems. If the longer hours are combined with deeper discounts, it is unclear whether retailers will come out ahead.

Douglas A. McIntyre

Posted on: December 22, 2007 – 10:57 am in Retail, ,

Turnarounds That Haven’t Turned Around: Micron Technology (MU)

Micron Technology (NYSE:MU) is one of the poor and beleaguered tech stocks that has been in turnaround mode for as long as memory serves.  The problem is that it is in a spot in technology that is a loser and it can’t turnaround in its current state.  At $7.53 on Friday’s close after giving a poor earnings report, this is a two-year low for the stock.  For all practical purposes it’s at a 5-year low.

There is a major problem and it might not EVER be able to be fixed.  DRAM is just a garbage business.  Its like trading a commodity that grows out of the ground, except that DRAM prices aren’t like other commodities.  As corn rises, as oil rises, as gold rises, and even as inflation rises, it seems that the path of DRAM is to only see lower and lower prices through time.  Not only that, but DRAM manufactured today is worth less than yesterday and that makes inventory a challenge.  We don’t see this changing for the better, or not much anyway.

Read More »

Posted on: December 22, 2007 – 10:14 am in Semiconductor, Turnarounds,

2008 Dogs of the Dow (C, PFE, T, VZ, MO, GM, DD, JPM, GE, HD)

Since it is year-end, we wanted to compile a list of the 2008 likely Dogs of the Dow.  We included Friday’s closing prices for each DJIA component and we also gave the current dividend yield.  It is always possible that these can change if the performance shoots up or if other DJIA components get hit extremely hard, but these should be the 10 Dogs of the Dow, sorted by yields going highest to lowest:

Citigroup (C) $30.24                       7.2%
Pfizer (PFE) $23.24                         5.5%
AT&T (T) $41.48                               4.0%
Verizon (VZ) $44.32                         3.9%
Altria (MO) $77.43                            3.9%
General Motors (GM) $26.64         3.8%
Dupont (DD) $45.35                        3.7%
JPMorgan Chase (JPM) $44.11    3.5%
General Electric (GE) $37.14         3.4%
Home Depot (HD) $26.66              3.4%

We’ll be following up next week with a more expanded statistical piece along with our own outlook from 247WallSt.com for each component of the 2008 Dogs of the Dow.

Jon C. Ogg
December 22, 2007

Posted on: December 22, 2007 – 9:14 am in Index, , , , , , , , , , ,